Quote:
Originally Posted by jimmysthebestcop
Does that really matter not even talking ootp, baseball is 100% guarantee
Say 5 years 100 million. Does it matter how it's distributed. Player gets 100 million no matter what.
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Yes.
It makes a
HUGE difference
People should know this not just for OOTP but for their own lives.
Let's take 3 extreme examples
Deal 1) 4 years at $1 million each year, and the 5th year at $96 million.
Deal 2) 5 years at $20 million
Deal 3) $96 million in year one and $1 million each year after
One of these should immediately jump out at you as the one you would want to receive.
We can calculate the present value (PV)
Assuming a 10% discount rate
Deal 1) $20 million average value, $100 million total value. $69 million PV
Deal 2) $20 million average value, $100 million total value, $83 million PV
Deal 3) $20 million average value, $100 million total value, $99 million PV
There's a $30 million difference between Deal 1 and Deal 3
Yes, that matters.
Now, why let's look at YF's example
Take the 7 year $27 million AV offer.
That contract pays $189 million total dollars no matter what.
If it's evenly distributed at $27 million a year, and using the same 10% discount rate as above, that $189 million is worth $138 million in PV
If it's distributed using these guidelines
Quote:
Originally Posted by yankeefan1024
I started at like 18 million, and incrementally increased up to about 45 million in the final years
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It can be worth as "little" as $125 million.
So, same average value.
Same total value.
$13 million less in present value.
Yes, it matters